By Adedapo Adesanya
Oil futures fell for a third day on Wednesday as ongoing concerns about demand, the strengthening Dollar and expectations for more interest rate hikes by major central banks weighed on the market.
As a result, the Brent crude futures shrank by $1.84 or 2 per cent to $92.45 per barrel, while the United States West Texas Intermediate crude futures contracted by $2.08 or 2.3 per cent to $87.27 per barrel.
Prices depreciated yesterday as the Organisation of the Petroleum Exporting Countries (OPEC) and the United States Energy Department slashed their demand outlooks.
OPEC cut its 2022 forecast for growth in world oil demand for a fourth time since April and trimmed next year’s projection, citing slowing economies, the resurgence of China’s COVID-19 containment measures and high inflation as the reasons.
“The world economy has entered into a time of heightened uncertainty and rising challenges, amid ongoing high inflation levels, monetary tightening by major central banks, high sovereign debt levels in many regions as well as ongoing supply issues,” OPEC said in the report.
“The slowing economic growth and a possible resurgence of COVID restrictions in China and elsewhere are expected to impact oil demand in 2022 and 2023,” OPEC added.
Oil demand will increase by 2.64 million barrels per day or 2.7 per cent in 2022, the cartel said in a monthly report, down 460,000 barrels per day from the previous forecast.
The lower demand outlook gives additional context for last week’s move by OPEC and its allies, known as OPEC+, to make their largest cut in output since 2020 to support the market.
Together with allies, including Russia, OPEC sent prices rising when it agreed to cut supply by 2 million barrels per day.
Amid this, OPEC is pumping far less than called for by the OPEC+ agreement due to under-investment in oilfields by some members, including Nigeria.
The United States criticised the decision. However, on Wednesday, the US Energy Department also lowered its expectations for global output and consumption in 2023.
The market is under pressure as well from the American Dollar, which continued its rally against other low-yielding currencies.
The US Federal Reserve’s commitment to keep raising interest rates to tackle high inflation has boosted yields, making the US currency more attractive to foreign investors.
Earlier in the week, the International Monetary Fund (IMF) cut its global growth forecast for 2023 and warned of increasing risk of a global recession.
